A dollar from 1913 buys about three cents today.

The 2% target, compounded

The Fed defines "stable prices" as 2% inflation per year. It sounds almost like a rounding error. Two cents on the dollar — who would notice? But inflation is not subtracted each year; it compounds. At 2% annually, the purchasing power of a dollar is cut roughly in half about every 35 years. A worker who saves cash across a single career watches half its value quietly evaporate, without a single line item appearing on any bill.

Run the same compounding across the Fed's full tenure and the result is stark. Since the institution opened its doors in 1914, the dollar has lost roughly 96–97% of its purchasing power, measured against the Bureau of Labor Statistics' own Consumer Price Index. The dollar you would have carried in 1913 is worth somewhere near three cents in today's money.

The currency didn't lose value by accident. It was managed to.

What "stable" is doing in that sentence

Defenders point out — fairly — that mild, predictable inflation is easier to plan around than wild swings, and that a small buffer above zero gives the central bank room to maneuver away from deflation. That is a real argument, and we take it up in full on The Case. But notice the sleight of language: a policy that guarantees your money will lose value every year is described as keeping prices stable. Stability, here, means a stable rate of decline — not a stable store of value.

The most recent reading makes the point. Annual CPI inflation currently runs at 4.2% (live, BLS). Even in a so-called normal year, the meter never stops.

A dollar, decade by decade

Walk it forward. In the 1910s, a nickel bought a loaf of bread and a dollar was a day's wage for many. Through the 1920s and 1930s, prices actually fell during the Depression — a reminder that decay was not always the default. The 1940s brought wartime price spikes; the 1950s and 1960s were comparatively calm, the postwar dollar still recognizable.

Then the 1970s broke the pattern. Stagflation drove inflation to a peak near 14.6% in March 1980. A 1970 dollar lost more than half its value before the decade was out. The 1980s through 2010s settled into the steady 2-ish percent grind — slow enough to ignore, relentless enough to matter. Then the post-COVID surge pushed inflation to 9.1% in June 2022, the highest reading since 1981, and a generation that had never felt inflation suddenly understood the word.

Each decade tells the same story in a different accent: the long-run direction of the dollar, under the Fed, is down. The interactive machine above lets you pick any year and watch what your money became.

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